5 Basic Principles of Economics

Thinking Like an Economist

Tag: Equilibrium Compatibility

  • Swiftonomics: Economic Ideas and Taylor Swift

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    Taylor Swift is accused of causing inflation. She also represents an innovative organization worth more than US$1,000,000,000. Beyond this high-level perspective on her impact, many teachers are using her career to demonstrate old economic ideas more memorably. Some instructors offer entire courses in university [1] [2] [3] [4] [5] and at the high school level.…

  • Fast Food and Downward-Sloping Demand Curves

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    A pair of recent news articles concerning popular fast-food restaurants noted differences for different brands. First, McDonald’s restaurants are changing tactics because consumers (in the US especially) are feeling stressed by the economy. Second, even if the Canadian economy is also performing poorly, Restaurant Brands International Inc. (RBI, which oversees Tim Hortons, Burger King and…

  • The Equilibrium Principle

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    The only relevant behaviours by members of a group of participants are those which are compatible with one another. Behaviours that are not compatible with the behaviours of others (e.g., with competitors and with the other side of the market) are not sustainable, regardless of the intentions of any one individual. Most people are familiar…

  • The Gains from Trade Principle

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    Most economic activities involving more than one person are not “zero-sum games”. They involve trading of some kind. Production without consumption is a waste and consumption without production is impossible. This perspective is not isolated to economics. Marketers encourage firms to adopt a “marketing orientation”, in which a firm seeks a profitable strategy which creates…

  • The Comparative Statics Principle

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    Comparative statics analysis is invoked in statements about the effects of differences or when linking cause and effect or when comparing a situation “before” with a situation “after”. Good comparative statics starts by clarifying which variables are “exogenous” (e.g., consumer tastes, production technology and so on) and which variables are “endogenous” (often price or quantity…